L Capital Asia, the private equity arm of global luxury conglomerate LVMH group, which owns brands like Louis Vuitton and Dior, recently started operations in India. The $640-million fund's plans for India include investing in lifestyle retail, consumer brands, beauty & wellness and hospitality, among other sectors. In an interview with Raghavendra Kamath, L Capital Asia Managing Partner Ravi Thakran talks about the fund's plans for the Indian consumer market. Edited Excerpts:
There are so many funds in the market. How would your fund be any different?
There are so many private equity (PE) funds and so much money is available. Even Indian corporates are investing. But for us, money is the last thing. We bring a lot of value addition such as expertise on branding mix, marketing and advertising, public relations and so on. We can tell how to design stores better and how to carry out proper visual merchandising. No PE firm can bring about these factors like we do. Besides, we can also teach how to negotiate locations, buy media and build supply chains, logistics and so on. More importantly, we can help people gain access to our global network. It is like working shoulder-to-shoulder with our investor companies.
There are companies which do well in India before going global. There are others, like those in Ayurveda, leather and fashion, which go international. We are looking at helping both types of companies.
Reports of you buying into companies like Genesis Colors and Gitanjali Gems have surfaced. Are they correct?
We are talking to quite a few players, but because of a non-disclosure agreement, we can not talk about that. Yes, we are talking to players in fashion, jewellery, beauty and so on. Within 60 days, we will announce our first investment.
By when would you exhaust your corpus, and how much is allocated to India?
Our limited partners (LPs) are happy to co-invest with us and together, we can invest up to $1 billion. To answer your question, we can exhaust this corpus in the next three years. We are looking at allocating equal amounts to India and China.
How much would you invest in each deal and what kind of returns do you expect from your investments?
We are looking at deals of $10 million-$100 million. In Europe, we were able to return two-and-a-half times of the capital employed and 27 per cent internal rate of return. In Asia, I think we can do more.
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How does L Capital fit into the overall strategy of LVMH in Asia?
L Capital is a 100 per cent subsidiary of LVMH. While LVMH focusses on luxury, we focus on aspirational brands, which are at a level below luxury in Asia.
What are the major differences between the Indian consumer market and markets in southeast Asia?
One big difference is that Indian consumers are conscious about value for money. If you don't give that, you will have to bang your head against the wall. In India, Indianess is a very vital factor in jewellery and fashion. In markets such as China and Korea, people have accepted western concepts.
There is a view that India lacks quality real estate for lifestyle and luxury brands. Do you agree?
I agree. China was like that in the 90s: few malls and few shopping destinations. But it reached a reflection point and changed everything. I think India will reach that phase in the next 3-4 years. By then, India will grow at 9-9.5 per cent and see better airports and better infrastructure. That will be the moment of reckoning. We want our companies to ride that wave. We want to keep them ready with better supply chains and logistics, marketing, merchandising, better processes and systems and so on.